Sign up for our FREE 8-week course to get on the property ladder.
What is an introductory home loan?
Introductory rate home loans are designed with first home buyers in mind. They offer a low rate of interest for a special promotional period (normally about a year), which helps keep your payments down. It’s not unusual for this low rate to be a whole percentage point below the standard rate.
Once the honeymoon rate period is over, the interest rate reverts to the product’s standard variable rate. If this revert rate is too high, you can consider refinancing to a cheaper home loan. This can take a little time and money, but will save you money in the long run.
Your lender may have another, similar loan product you could switch to instead of refinancing with a completely new lender.
Honeymoon home loan calculator
Are honeymoon rates the best choice for you?
The most attractive feature of a honeymoon loan is of course its low introductory rate, but before you choose your new home loan, consider the different ways you can save interest in the first years of your mortgage.
- Fees. Check the loan fees carefully. Most honeymoon rates are on variable home loan products. This means legally the lender cannot charge you a breaking fee. But if it's a fixed rate introductory discount then exiting the loan during this period can be costly because of fixed loan break costs.
- Loan purpose. If you're an investor you need an investment loan. If you're a home owner then it's an owner occupier loan. Most honeymoon home loans are for owner occupiers only.
- Features. Some loans allow you to make extra repayments and spend those extra repayments later via redraw if you need them. This can help you repay the loan faster and have extra cash when you need. An offset account does this but is even more flexible because the money is easier to access. Some introductory loans allow extra repayments but might be harder to find one with an offset account.
If you would like to see what effect additional repayments have on your mortgage, check our extra repayment calculator.
What should you do when the honeymoon rate ends?
Make note of your home loan's honeymoon period. It's usually only for one or two years. Your lender may notify you when the period ends, but they might not. Either way, check your home loan statement or log onto your lender's website and check the new rate your loan is now on. It's likely higher than the honeymoon rate.
Then you should do the following:
- Compare rates. Check the latest home loan rates and see if your new rate is competitive or not. If not, you should consider switching (also called refinancing).
- Find a new loan. Once you've compared rates find a new loan that suits your needs and has a more competitive rate.
- Check switching costs. Once the honeymoon rate is over you will most likely be on a variable rate (even if it was fixed before). The loan may have have a discharge or switching fee of a few hundred dollars. The new loan may have some upfront fees too, such as an application fee.
- Apply for the new loan. Organise your home loan application and hopefully you're successful. Your new lender will handle the change over and you just need to complete a discharge form with your old lender. And with that the honeymoon is over.
More guides on Finder
How to get a home loan in Australia
Taking out a home loan can seem like a huge mountain to climb. But when you break it down into these 10 key steps, it becomes much easier.
Finder’s Property Investment Index Sydney
Finder's Property Investment Index predicts price growth in each suburb across Australia's major cities.
4 of the biggest mistakes people make when buying property
Chris Gray takes us through four things people get wrong when buying property.
Going once, twice, three times
Auction expert Damien Cooley gives the lowdown on why property auctions are the best way to sell right now.
APRA-cadabra: Why Australians will be able to get larger home loans
Richard Holden from UNSW Business School delves into Australian home loan sizes and rate cuts
Are Sydney house prices really set to fall?
We can't make clear predictions about Sydney's property market, but here's what the data suggests.
5 unbreakable laws for home makeovers
Designbx's Kerena Berry on how to give your interior design a professional look.
7 things you need to know about insurance when renovating
There's profit to be made in renovating your home, but don't jeopardise your insurance when you do.
What a $500,000 home looks like around the world
We compared what $500,000 will buy you in Australia vs 13 global markets to see which gets you the most bang for your buck.
How to cut 2 years off your mortgage
Australians are now drinking less than we previously were. Find out how you could save $40,000 by simply not drinking alcohol.
Find the right home loan now
Ask an Expert